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#RandReport: Rand, bonds recover as Zuma says not at war with finmin

As of 1600 GMT, the rand had firmed 2.32 percent to 15.7940 versus the dollar.

The South African rand. Picture: Craig Wynn/EWN.
Rand,SA rand vs US dollar,dollar
Business Local

JOHANNESBURG - South Africa's rand firmed against the dollar on Monday after President Jacob Zuma said he was not at war with Finance Minister Pravin Gordhan, following media reports that they had fallen out.

The currency of Africa's most industrialised economy fell nearly four percent on Friday, its biggest daily loss since 2011, after Gordhan said there were attempts to discredit him and the integrity of the Treasury.

Gordhan's statement followed a newspaper report which quoted sources as saying he had threatened to resign after receiving a letter from the elite Hawks police unit questioning his knowledge of a suspected rogue unit at the revenue service.

This followed media reports of a clash between Gordhan and the head of the South African Revenue Service (Sars).

The Hawks also said they were not investigating Gordhan, and there was no case against the minister.

Gordhan, who headed Sars at the time, has said he has no case to answer. A presidency statement on Monday said Gordhan's position was under no threat, calling reports to the contrary "total fabrication and mischievous sensationalism".

As of 1600 GMT, the rand had firmed 2.32 percent to 15.7940 versus the dollar from Friday's close of 16.1600.

Government bonds were mostly weak. The yield on the benchmark instrument due in 2026, which soared as much as 28 basis points in early trade, was up 5.5 basis points to 9.42 percent.

"SOOTHED FEARS"

"Following the events of December after Nene was sacked, markets are much more sensitive about these developments and the fact that Zuma has made these statements, it does seem as though it has soothed investor fears to some extent," said ETM Analytics market analyst Jana van Deventer.

Zuma sacked then Finance Minister Nhlanhla Nene in December in favour of a relatively unknown lawmaker, David van Rooyen, unnerving investors in an ailing economy.

The currency however remains vulnerable after Treasury forecasts last week showed the economy may expand just 0.9 percent in 2016, the lowest rate of growth since South Africa emerged from recession in 2009.

"The perception out there is that Zuma is not really supporting Pravin Gordhan," said analyst William Gumede, an associate professor at Wits University's school of governance.

"He has to show leadership and show the markets that he is really supporting Pravin. If he doesn't, he undermines the credibility of the Treasury, and the Treasury is what is standing between us and getting junk status."

Ratings agency Moody's rates South Africa two notches above junk, but Standard & Poor's and Fitch have it just one step away from a sub-investment grade. All have warned of possible downgrades since Nene's firing.

"The market's reaction is not quite as negative as in December 2015 when Nene was replaced, but if there is another market-unfriendly change, then the market reaction could be worse and more permanent," Citi strategist Adriaan Du Toit said.

South Africa's Top-40 index lost 0.13 percent and the broader All-share ended flat at 49,415 points.

Barclays Africa Group Ltd closed 6.10 percent lower at 136 rand on speculation that Barclays Plc was evaluating strategic options for its 62.3 percent stake in the African business, a holding worth some $8.3 billion.

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